1/22/2009 @ 3:40AM

Party's Over For English Soccer Splurge

“In the good years, they relied on cheap debt to invest in valuable assets and beat their competitors; now that credit is getting crunched, their ability to repay that debt looks under threat.” A familiar refrain from the business world, but not so common in the arena of sports so far. Yet, soccer fans in Britain will be hearing this a lot more in 2009.

The scale of the problem is disputed by industry insiders and commentators, but the level of debts taken on by English soccer teams has become a hot-button issue as the economic slump threatens traditional revenue streams. For the whistle-blowers, it is a case of calling time on vastly inflated soccer salaries and the typically unprofitable results of top-level teams. For those who maintain that the debts are manageable, it is seen as alarmist to question the worth of football teams and their ability to rake in sales.

Part of the difficulty is that the most recent set of complete results from Premier League teams covers only the 2006/2007 season, and even after the 2007/2008 results are released, it will take a long while yet for the effects of the current economic downturn to become clear. But with total debt and income roughly balanced at more than $2.2 billion for the Premier League–the cream of the English “football” crop–that means there is little room for maneuver if sales start to slip. (See “Europe’s Coming Soccer Bubble.”)

“The evidence suggests that, just as in the wider economy, the amount of debt in British football is a problem,” said Sean Hamil, an academic at the University of London’s Birkbeck Sports Business Center. “In the light of this it is hugely optimistic to assume that Premier League football will be immune from the effect of the ‘credit crunch.’ It is inevitable that there will be bankruptcies amongst Premier League clubs in the next twelve months.”

A bold claim, but Hamil is in good company. The chairman of English soccer’s governing body, David Triesman, lambasted English soccer’s total $4.1 billion “debt mountain” last year; he was even cited as saying he could not rule out a top team going bust. Meanwhile, France’s Michel Platini, head of the European governing body UEFA, has regularly blasted English teams for deliberately going in the red to poach star players. He may have personal memories of France’s own soccer history, which in the 1980s was dogged by dabbling tycoons and big-money transfers.

Worrying about debt may seem strange at a time when billionaire owners like Roman Abramovich (Chelsea), Malcolm Glazer (Manchester United) and most recently the emirate of Abu Dhabi (Manchester City) are in charge. But repaying debt in these tough times is not always easy, even for billionaires; with Manchester United paying around $59.0 million a year to service its $901.0 million in debt, rumor has it that Glazer is looking to sell assets such as his Tampa Bay Buccaneers American football club. The British Sunday Times reported that even Russian oligarch Roman Abramovich was trying to sell Chelsea. Finding a good price when even billionaires are losing money will be tough.

As for soccer revenues, they may not be particularly defensive in the current environment. Corporate sponsorship deals are unlikely to be as lucrative as they were a few years ago, while industry watchers are reporting a decline in demand for premium tickets such as box seats. Whether all this will be enough to topple teams like Liverpool or Manchester United, though, is open to question, and the Premier League is not worried yet.

“In the history of the Premier League, no individual club has come close to suffering an insolvency,” said a league spokesman. “Whilst we can never say never, given the strength of revenues going forward in the Premier League, in my opinion, it would be difficult to envisage a club going bust.”